Asia’s attempts to rebalance growth towards domestic sources will in part depend on the development and growth of the region’s business sector, says a newly published report from the Asian Development Bank (ADB).The report, published in a special chapter of Key Indicators 2009, the flagship annual statistical publication of the ADB, says a return to rapid regional growth will require stronger domestic demand, for which the emergence of a large and rapidly growing urban middle class is key.
The health of Asian enterprises, especially small and medium-sized enterprises (SMEs), where most Asian workers are employed will be important in this regard, said the ADB sources.
The special chapter, titled ‘Enterprises in Asia: Fostering Dynamism in SMEs’, looks at the actual and expected impacts of the current global economic crisis on workers and enterprises and discusses how to make SMEs more innovative and productive once the crisis has played out.
"In view of the weak outlook for the major global economies, it’s unlikely that Asia can export its way out of this slump, as they did after the 1997-98 Asian financial crisis," said Jong-Wha Lee, ADB Chief Economist.
"Consequently, some economies need to accelerate the rebalancing process to increase domestic demand, and to assist that process they need to take steps to unleash the constraints to growth on SMEs, which so many Asians rely on for their livelihoods."
Many of the region’s most dynamic and export-oriented enterprises have been forced, as a result of the crisis, to scale back operations, cut production, and lay off workers.
In seven out of eight East and Southeast Asian countries tracked in the report, manufacturing employment has declined by about 2 per cent to 7 per cent between the first quarters of 2008 and 2009.
Smaller enterprises, which tend to be more domestically-oriented, have been less affected, but the credit crunch and a slump in demand are now beginning to hurt.
Many governments have taken steps to support economies through fiscal stimulus and the easing of monetary policies. Some have directly assisted enterprises through credit guarantees, subsidised loans and fiscal incentives, among other programmes.
Governments can assist firms by providing information services on technology and markets, vocational training, and technical support services, and by fostering linkages between SMEs and large enterprises.
Meanwhile, the data unveiled today in Key Indicators 2009, the ADB flagship annual statistical publication, which presents the latest available economic, financial, social, environmental, and MDG indicators for regional members of the ADB said that Asia and Pacific countries continue to make broad progress in reducing extreme poverty but hunger still remains widespread and many economies are struggling to meet other Millennium Development Goals (MDG), including reductions in maternal mortality rates and access to sanitation, latest available data show.
Over the past 15 years, Asia has made rapid progress in the fight against poverty, reducing the number of poor from around one in two people to around one in four. However, large pockets of extreme poverty continue to persist even as many economies have posted record growth rates over that time.
"With the recent global downturn, which has led to large declines in exports, production, and aggregate demand, regional growth will continue to be under severe downward pressure," said Lee.
Slower growth in the short-term will make progress in achieving the Millennium Development Goals difficult for many countries in Asia and the Pacific, Lee added.
The region is facing serious challenges on goals linked to sanitation and maternal mortality. The indicators show that maternal mortality rates remain unacceptably high in many countries such as Afghanistan, Cambodia, and Nepal, while more than a quarter of urban households in 13 countries still lack access to improved sanitation.
The region’s fast growth in recent years has also put severe strains on the environment, with developing Asian countries becoming heavy contributors to greenhouse gas emissions.
Key Indicators 2009 regional tables, covering economic, financial, and social development indicators, provide further insights into the overall health of the region.
The latest available data show that a growing number of people aged 65 or over is expected to put an increasing strain on health and welfare infrastructure going forward while per capita incomes show that the gap between rich and poor countries remains wide.
Inflows of foreign direct investment fell sharply in a number of economies last year as a result of the global economic crisis, while registering new businesses remains a lengthy process in some countries.
At the same time, the data show that savings ratios in Asia remain broadly high, intra-regional trade is strong, and the balance of payments position of most economies is sound.
Source: Gorkhapatra
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